Sale of Plant Asset Lone Pine Company has a machine that originally cost $60,000. Depreciation has been recorded for four years using the straight-line method, with a $5,000 estimated salvage value at the end of an expected ten-year life. After recording depreciation at the end of four years, Lone Pine sells the machine. Prepare the journal entry to record the machine’s sale for (Round to the nearest dollar): a. $39,000 cash b. $38,000 cash c. $28,000 cash
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Sale of Plant Asset
Lone Pine Company has a machine that originally cost $60,000.
| a. | $39,000 | cash |
| b. | $38,000 | cash |
| c. | $28,000 | cash |
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| a. | Answer | Answer | Answer |
| Answer | Answer | ||
| Answer | Answer | Answer | |
| Gain on Sale of Plant Assets | Answer | Answer | |
| To record sale of machine. | |||
| b. | Cash | Answer | Answer |
| Answer | Answer | Answer | |
| Answer | Answer | Answer | |
| To record sale of machine. | |||
| c. | Cash | Answer | Answer |
| Answer | Answer | Answer | |
| Accumulated Depreciation - Equipment | Answer | Answer | |
| Answer | Answer | Answer | |
| To record sale of machine. |
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